HARP 2.0 Explained

The government has recently announced the extension of its Home Affordable Refinance Program, and at the same time relaxed eligibility requirements in order to make the program more accessible to those who need it most.

First established in 2009, HARP was instigated as an option for underwater homeowners wanting to refinance their mortgage at lower interest rates. The original program was touted as the housing market’s ‘shining knight in armor’ when it was first rolled out, with government expectations that it would assist millions of homeowners who found themselves owing more on their mortgages than what their homes were worth.

Till now however, HARP has fallen woefully short of these expectations – prompting the government to relax eligibility requirements in an effort to help more people stave off foreclosure.

Billed as HARP 2.0, the government has extended the program until December 31, 2013 and set out new guidelines for those wishing to apply. One of the biggest criticisms of the original plan was that in order to qualify, homeowner’s loan-to-value ratio was required to be less than 125%, automatically ruling out millions whose home value fell below that figure. This requirement has now been relaxed with HARP 2.0, which stipulates that the property only has to be valued at less than the mortgage in order for homeowners to qualify.

In addition, the original HARP was restricted to the country’s five largest loan servicers – Bank of America, Citigroup, Ally Financial, Wells Fargo and JPMorgan Chase – further limiting the program’s accessibility.

Under HARP 2.0, the program is now available to all mortgage servicers, even in those cases where the mortgage had insurance attached, something that caused big difficulties under the original program. Mortgage insurers are required to sign off on a refinancing deal for any homeowner whose mortgage is insured, and now they are working with lenders to streamline this process, something that should result in many more approvals for HARP 2.0.

Certain rules remain in place for homeowners wishing to refinance through HARP 2.0. As with the original program, HARP refinancing is only available to Fannie Mae and Freddie Mac mortgages. Further, homeowners must be current with their mortgage, with no record of late payments in the last 12 months, and they must be able to show that they can afford the new payments on their home.

Aside from the changes in eligibility for HARP, the government is also making efforts to speed up the approval process, by eliminating the need for an appraisal in many cases.

Comments

just rejected for harp 2.0. I had to short sell a piece of property last December, so, now I don’t qualify to refinance this house, even though I have never been late or missed a payment, still have a 700 credit score and plenty of cash reserves. Once again, the government had done nothing to help middle class me, who has struggled to do the right thing the past few years. The irony is, I will now likely foreclose on this house and feel no guilt over it whatsoever. Tired of trying to work with these agencies and lenders.

Does it say HARP 2.0 on any of your new loan documents? Or does it say conventional loan refinance? I would feel better if it said HARP 2.0 so when the bank reports to whoever then I as a consumer have proof in case something changes with the government. My bank wants 4.5 andabout 3k to get the deal done, but I am going to shop and be patient. I will probably get screwed again, as usual.

My husband and I just this morning closed on a HARP refi with Wells Fargo. We went from 6.25 to 3.75. We did not have any fees or closing costs. It was a very simple and quick process..about 3 weeks from the initial call to closing. Our loan was with Wells Fargo and backed by Fannie Mae. Wells Fargo was great!!!!

I had a completely different experience at Wells Fargo. I met all the eligibility requirements under the HARP and tried to for 2 years to refinance, but Wells Fargo had so many overlays (new downpayment, appraisal, underwriting, etc.), it was a nightmare. I ended up just walking away. My credit took a hit but two years later, I am in a brand new home and I am paying less for my new mortgage than the deal WFB was offering in the refinance.

Steve: Good points — accurate assessment. But it’s still important to remember that this is a rate/term loan product, not a principal reduction program. If you’re underwater prior to refinancing, you’ll still be underwater afterward, but with a new loan at a lower rate and hopefully more affordable long-term.

For those who might be prematurely concerned about the loan costs associated with a HARP 2.0 refinance, remember that prior to March 17th, only the current SERVICER of a HARP-eligible loan may underwrite the program, and it’s 100% manual underwriting and very high-risk to the lender, since they’re on the hook dollar-for-dollar if the homeowner defaults on the modified loan later. That’s why many of the big banks engaged in this now aren’t putting out great interest rates and low loan fees. Once the entire system comes online after 3/19, competition will keep costs competitive, since so many more lenders will be able to participate.

Regardless, loan costs have to be weighed against savings over an extended period of time. The “perfect” loan isn’t necessarily the one with the lowest fees, OR the lowest rate. It’s a balance of the two. If your current interest rate is 6.00% on a loan of $200,000, and the HARP 2.0 program enables you to refinance at 4.00%, that’s a monthly savings of $244.27/month. Even if your refinance costs were $5000, that’s a recapture period of 20.5 months. Another lender offering a 4.50% rate and $2500 in loan fees would be a better deal overall, ASSUMING you refinanced again in 43 months. If you keep your loan longer than 4 years you’d have been better off paying $2500 more in closing costs and taking the 4.00% rate instead. It’s $702 less per year, or $18,500 over the life of the loan (30 years).

I’m a lender in California and we will be offering HARP 2.0 after 3/19 for California properties only.

Your response makes sense to me. My primary home is in CA, is either Freddie Mac or Fannie Mae, and Ditech/GMAC holds our current 1st. They sold off our HELOC to SLS. Zillow does not even value the property at the same amount that we owe on the 1st. I checked into this last month and Ditech said that only they could help me.

I would like to talk to you about HARP 2.0 for my CA owner-occupied property when you have the time.

I agree! I am working with my Credit Union on refinancing and just last week found out I was not approved for the “old” Harp program. I have been advised through my Credit Union to wait a couple of more weeks and see if I will be approved through the “new” Harp 2.0 program. I am now having a hard time justifying even going through with the whole refinance because after paying $350 for an appraisal of my townhouse I have found out it is appraised at $85,000 and I owe $105,000! My credit union is going to charge me $3,000 to refinance! Once that is rolled into the closing my new mortgage will be $108,000 but yet its only worth $85,000!! I’m so sticking confused! I have never missed a payment or even been late and it seems there is no help out there for people like me. Now if I decided to “miss” a few payments there would be all sorts of help!!! Any advice would be greatly appreciated.

I don’t understand why the government is offering the Harp 2 program to homeowners who are backed by Freddie Mac and Fannie Mae and telling other owners like myself that we cannot refinance if other companies back our loan. We have no say when the bank sells our loan to whatever company they choose, but we are being rejected for a refinance simply because the above mentioned companies do not back our loan. We have excellent credit, all payments are up to date, retired and raising our grandson, but yet we cannot take advantage of this program. Could you please respond to this question.

Because Fannie and Freddie are in government receivership. It can therefore tell them what kind of rules to allow for refinancing mortgages that they own or guarantee. It can’t do that with loans that are backed by strictly private entities.

If your loan is held by one of the big 5 banks, you might be able to get some kind of relief through the recent $26 billion robo-signing settlement, which provides relief only to non-Fannie or Freddie mortgages.

If your mortgage is with FHA or VA, you ought to be able to obtain a streamlined refinance as long as you are current on your payments.

Here is my take on HARP. HARP is a program to reward the responsible homeowners who did not bail on their home and have continued to make their monthly payments. When I say responsible I am not degrading the working guy that had his company lock the doors and lost his job and ultimately his home. I am referring to the families that have the same job and roughly the same income as before the home values dropped. When the bubble burst these folks completely lost the ability to refinance their homes. In the sand states the average home owner owes more than 125% of the value of their home and in most cases they owe between 135-180% more than their home is worth. The 2.0 version of HARP will allow these loans to be refinanced at the current market interest rate. In the case of a 200k loan that could save almost $200 per month in interest. Where would this extra household money go? Back into the economy to begin the regrowth process. It’s about time that the people driving the economy in this country (the middle class) get the bail out. This is exactly what we need to get things heading in the right direction. It will incentivize the people paying their bills and at the same time make it worthwhile to stay in a home that is worth half of what it’s worth. To the dead beat that thinks that is a bad “business” decision think again. If everyone that owed more than their home was worth bailed we would collapse the US economy and every bank and insurance company in it. I am not an Obama fan but this is a good program and it is good for our future and the future of our economy. By the way I still make my payment and will be ready to refinance come March 15.